Staff expenses at state-run commercial banks have gone through the roof due to overstaffing, hitting their profitability.
Staff expenses of Nepal Bank Limited, Rastriya Banijya Bank and Agricultural Development Bank Limited -- three commercial banks run by the government -- stood at Rs 747.93 million, Rs 705.36 million and Rs 1.08 billion, respectively, in the first-half of the current fiscal year to mid-January.
These spending are 75.88 percent of the total non-interest expenses at Nepal Bank, 70.97 percent at Rastriya Banijya and 85.74 percent at Agricultural Development Bank, unaudited first-half financial reports show.
These compare with first-half staff expenses of Rs 267.93 million -- 54.62 percent of the total non-interest expenses -- at Nabil Bank and Rs 166.73 million -- 40.90 percent of the total non-interest expenses -- at Nepal Investment Bank--two largest private sector-led banks in terms of assets.
“High staff expenses is one of the peculiarities of state-run banks,” Maheshwor Lal Shrestha, coordinator of Nepal Bank Limited, said. “Although we have been cutting down the workforce, spending on salary, gratuity and other staff benefits still seems to be on the higher side.”
Nepal Bank, for instance, has over 2,700 employees on its payroll. Considering the latest technologies used by the bank to extend banking services, the bank does not need more than 1,800 employees, experts told Republica.
“Yes, overstaffing is a problem,” Shrestha acknowledged. “But around 600 employees are retiring over the next two years, so the expenses will come down gradually.”
Although state-owned Rastriya Banijya Bank also agreed overstaffing as a problem, it said it was planning to increase business volume by retaining current size of workforce.
“We have already brought down the number of staff from 5,800 around five years ago to around 2,600 at the moment,” Rastriya Banijya Bank CEO Krishna Prasad Sharma told Republica. “We will use this workforce to generate more business.”
Similar response was made by Upendra Bahadur Karki, a deputy general manager of Agricultural Development Bank, which has around 2,800 employees on its payroll.
Although their comments are valid, the number of staff in state-run banks is way more than in private sector-led banks of similar size.
Nabil Bank, for instance, which is bigger than Nepal Bank and Agricultural Development Bank in terms of assets, employs around 1,200 people. Nepal Investment Bank, whose asset size is similar to that of Agricultural Development and Nepal Bank, on the other hand, has a workforce of around 885 employees.This oversized workforce is affecting profitability of state-run banks.
The spending Nepal Bank made on its staff in the first half, for example, is 19 times its net profit of Rs 39.09 million. Similarly, staff expenses of Rastriya Banijya is little more than its net profit of Rs 609.93 million booked in the first half of the current fiscal year, while staff expenses of Agricultural Development Bank is almost double its net profit of Rs 546.35 million recorded in the first six months of the current fiscal year.
link:
http://www.financialnepal.com/news/detail/overstaffing-hits-profitability-of-state-run-banks
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